Investec downgrades ‘deeply underwhelming’ Martin Currie trust

Investec has downgraded a Martin Currie-run investment trust due to its “deeply underwhelming” performance, arguing investors should sell out of the vehicle.

The performance of the £234.5m Martin Currie Global Portfolio has been “concerning” and its attempts to keep its stock price up are “clearly not sustainable,” warned Investec analysts Alan Brierley and Ben Newell.

Since incumbent portfolio manager Zehrid Osmani began heading the trust in 2018, the trust’s underlying assets have only grown by 7.3 per cent every year, compared to a 10.1 per cent annual increase in its benchmark, the MSCI All Country World index.

“Given the quality growth philosophy, it is pertinent to highlight that the MSCI ACWI Growth annualised total return is 12.6 per cent,” said the Investec analysts.

The problem has only got worse in the last year, with the trust’s interim results earlier this month revealing that underlying asset growth over the first six months of the year had been just 4.4 per cent, with share price growth at a slightly better 5.8 per cent.

However, the trust’s benchmark grew 11.5 per cent in the first half of the year.

Martin Currie’s trust also employs a zero-discount policy, meaning it buys back shares if its stock price and value of its underlying assets ever start to widen.

While the trust has managed to maintain its average discount at two per cent, “material buybacks were required to address a growing supply/demand imbalance,” said the analysts, noting that the trust was buying back 13.6 per cent of its shares every year.

“With a market capitalisation of just £235m, this is clearly not sustainable,” Brierley and Newell warned, while downgrading the trust to a Sell recommendation.

“In the current climate and with the company in danger of losing critical mass, perhaps the time has arrived for a strategic review to be considered,” they added.